By Michael Liedtke
The Associated Press

SAN FRANCISCO - With its low prices and iconoclastic attitude, discount stock broker Charles Schwab Corp. represented an annoying stone in Wall Street's wing-tipped shoes for decades.

Now Schwab is scrambling to adjust to competitive threats posed by nimble rivals like E-Trade Financial Corp. and Ameritrade Holding Corp.

Both of these Internet upstarts have rebounded from tough times by appealing to Schwab's bread-and-butter audience - independent-minded, bargain-loving individual investors searching for an alternative to the financial services establishment.

"It's a market that's ours to win now," E-Trade CEO Mitch Caplan said. "We believe we have the best value proposition on the Internet."

Since his appointment early last year, Caplan has positioned New York-based E-Trade as an online financial services bazaar that supplements stock trades with a variety of banking products.

The strategy has paid off so far, with E-Trade's market value more than doubling since Caplan took over. During the same 18-month stretch, Schwab's long-slumping stock has declined by another 8 percent.

Industry analysts say Schwab became more vulnerable in recent years as it started acting more like a conventional broker.

"Schwab once defined the discount brokerage industry, but now the company has lost its way and is trying to find its way back," said analyst Matthew Snowling of Friedman, Billings, Ramsey & Co.

Schwab's distress provoked last month's ouster of David Pottruck as CEO, clearing the way for founder and chairman Charles Schwab to try to get the San Francisco-based company back on track.

Since his return three weeks ago, Charles Schwab has declined to talk to the media except for a brief interview with Dow Jones to deny a report that the company's troubles might lead to its sale.

Schwab's appeal has been fading for many customers. The brokerage ended June with 7.5 million customer accounts, down by about 3 percent from 7.7 million at the same time last year. Both Ameritrade and E-Trade have been expanding. Ameritrade had 3.5 million customer accounts in June while E-Trade's brokerage accounts totaled 2.9 million.